Festive time: Camps Bay beach in Cape Town is already filled with people and signs are that it will be a good season for the tourism industry. Photo: David Harrison
South Africa has a long-standing tradition of December being party season, and if Black Friday — when FNB clients alone spent R3 billion — is anything to go by, 2022 will be the country’s first “normal” December in two years.
In December 2020 the country was on lockdown level three. There were more than one million confirmed coronavirus cases by 28 December 2020 and more than 50 000 new cases had been reported after Christmas Eve.
December 2021 was marred by the Omicron variant, with adjusted alert level one in place from 1 October 2021 to 4 April 2022.
Again, South Africans missed their December.
Wayne McCurrie, a senior portfolio manager at FNB Wealth and Investments, said this year’s December would be “reasonable”, the tell-tale sign being the good data that has been published lately, such as the third quarter GDP results.
South Africa’s GDP registered an unexpectedly robust rebound in the third quarter, increasing by 1.6%.
Eight industries recorded positive growth between the second and third quarter of 2022, according to data released by Statistics South Africa..
“If you look at all the bank trading updates, people are borrowing money. The negative is that interest rates are higher and that will curtail [borrowing] a little bit. But I think we will have a reasonable December, it’s not going to disappoint,” McCurrie said.
Nedbank said in its trading update for the 10 months to 31 October 2022 that it had been lending more even as interest rates continued to climb.
The fourth quarter usually does well; even 2021 numbers showed that consumer demand recovered in the fourth quarter, with household expenditure rising by 2.8% as consumers increased spending across all product categories. The largest positive contributors to household expenditure were food and non-alcoholic beverages, restaurants and hotels, according to Stats SA.
Rosemary Anderson, the national chair of the Federated Hospitality Association of South Africa, said the hospitality sector was in a better position than it was going into the festive season last year, because travel bans had been reintroduced with the emergence of Omicron.
“It has been a steady but slow journey of recovery with many headwinds and tailwinds along the way. In terms of tailwinds, there’s incredible pent-up demand for travel — much of it last minute, which makes it difficult for hospitality businesses to plan — while economic pressures, geopolitical tensions such as the war in Ukraine, travel industry staffing shortages and to a certain extent still some uncertainty, continue to factor in the decision to travel,” she said.
The luxury hotel segment bounced back stronger than other segments.
“Accommodation types that have also done well are self-catering accommodation providers and lodges. Consumers are spending more on their travels, staying longer and opting for more luxury, having deprived themselves during the pandemic.”
According to Stats SA, total income for the tourist accommodation industry increased by 79.3% in September 2022 compared with September 2021, with hotels recording the highest year-on-year increase at 90.9%.
The City Lodge Hotel group recently released its voluntary operational update where it said that based on current demand, it was optimistic that December occupancy levels could exceed 2019 levels.
The group said monthly occupancies at its hotels had grown from 52% in July 2022 to 60% in November 2022. The average occupancy level so far this financial year has been 56.5%. Room rates have increased by 9.5% compared with the previous year, which brought City Lodge back to 2019 levels.
Thambo Mthwalo, an equity analyst at Citadel Investment Services, said: “The relief that the leisure industry gets from tourism and this time of year is pretty significant. I doubt it will change this year.
“You can expect the same level of activity as a ‘normal’ December,” but, he cautioned, “I don’t think you’ll see the same spending. I think people will go to places but not necessarily spend as much money because fuel costs are still high.”
The department of energy announced that 93 and 95 unleaded petrol will increase by 59 cents a litre for the month of December.
Marcel von Aulock, the chief executive of Southern Sun Hotels, said the industry is doing “much better”, but has only really started to recover in recent months.
Although the hotel group lost nearly R500 million in the first year of the pandemic and managed to break even in the second year, it was “expecting a pretty good season, even though December is not our peak month”, he said.
“The coastal properties do well but many of the business-related hotels have a quieter month in December. For the Southern Sun Group overall, February and March are our biggest months and those look pretty good for 2023. We’ll have to see how business travel recovers in the new year.
“We substantially restructured the business and saw some recovery in trading. It is only now that we are approaching some sense of normality, Von Aulock said. “In the short term, the group remains optimistic that trading levels will continue to improve throughout the summer season.”
The fifth annual Summer Spending survey, in which short-term lender Wonga surveyed 8 500 people, found that food and beverages would account for more than 35% of festive season spend.
This was followed by transport, which makes up about 17% of festive budgets, with South Africans spending an average of R1 171 each to travel to their holiday destinations.
Their favourite way to celebrate the festive season is by getting together with family and friends (77%), according to the survey.
December usually boosts leisure sectors such as retail, hospitality and beverages, which were all doing “extremely well”, McCurrie said.
“The South African Breweries continues to see consistent growth of its products and hopes that this trajectory will continue to grow during the festive season,” according to SAB’s senior media relations manager, Kanyisa Ndyondya.
Although SAB’s potential sales revenue that was lost amounted to R42.2 billion during the four lockdown-induced alcohol sales bans, beer remained a key contributor to the economy and this festive season would not be any different, Ndyondya said.
For years, Black Friday has been a precursor of sorts to how much spending the country is to see during the festive season. FNB said the R3 billion spent this Black Friday was the highest Black Friday spending over the past four years.
But does this mean there is money to go around despite the rising cost of living?
McCurrie said South Africans are not as indebted as is often perceived, which shields them from higher interest rates, and means they may have some extra cash to spend.
“And if you manage to retain your job, you’ve actually got a reasonably good salary increase this year. Salary increases went up by 5% to 7%, which is not bad at all. So people are in a slightly better shape than you sometimes read about … and so this December won’t disappoint”.